Framework Remission of Penalties
Presenters : Adv Christel van Wyk
Overview
Penalties now feature in most disputes with SARS, and they are often imposed or upheld without proper consideration of the facts, the applicable remittance provisions or the burden of proof. This session sets out a structured approach to penalty disputes under the Tax Administration Act. It shows how to establish the underlying tax treatment and supporting evidence, choose the correct route (a remittance request for non-compliance penalties, or an objection to an understatement penalty), manage the tax debt and the taxpayer’s compliance status while the dispute runs, and meet the critical time frames from the outset. It explains the burden of proof under section 102, including SARS’s onus to prove the facts on which an understatement penalty is based and the importance of the Pretoria East Motors principle that SARS must assess on proper grounds.
The session then covers administrative non-compliance penalties. For fixed-amount penalties, it deals with the section 211 table, the procedure for imposing penalties under section 214, and remittance under section 215, including the often under-used section 215(5) route through the remittance grounds in the underlying tax Act. It also covers first-incidence relief under section 217(3), exceptional circumstances under section 218 and incorrectly assessed penalties under section 219. For percentage-based penalties, it addresses late payment and the underestimation of provisional tax, the 36-month “first incidence” rule, the proportionality argument in Peri Formwork, and a detailed example of an objection to SARS’s refusal to remit.
The final part examines understatement penalties: the definitions of understatement, tax position and substantial understatement, the section 223 behavioural table, reasonableness, the bona fide inadvertent error exception, and compulsory remittance where the taxpayer has made full disclosure and holds a more-likely-than-not opinion. Through Coronation, Thistle Trust, Purlish Holdings, Lance Dickson Construction, LDC Taxpayer, AC Peter and the gross negligence authorities, it identifies the arguments available in each behavioural category and the limits that the pleadings place on the tax court’s power to increase a penalty.
Topics covered
- Approach to penalty disputes: the types of penalty, building the factual and legal record, the interaction between the TAA and the underlying tax Act, remittance versus objection, pay now argue later, compliance status, and time frames
- Burden of proof: section 102(1) and (2), requesting reasons, avoiding a reversed onus, and CSARS v Pretoria East Motors
- Fixed-amount penalties: the section 211 table, imposition under section 214, remittance under sections 215 to 219, the RFR01 process and its collection protection, SARS guidance on nominal, first-incidence and exceptional circumstances, and a worked example
- Percentage-based penalties: late payment and underestimation penalties, the first-incidence definition in section 208, Peri Formwork Scaffolding Engineering v CSARS, and a detailed provisional tax remittance and objection example
- Understatement penalties: the definitions in section 221, imposition under section 222, the section 223 percentage table, reasonableness, the bona fide inadvertent error exception and its amendment, and compulsory remittance under section 223(3)
- Case law by behavioural category: substantial understatement (Coronation, SCA 2023 and CC 2024), no reasonable grounds and reasonable care not taken (Thistle Trust, Purlish Holdings, Lance Dickson Construction, LDC Taxpayer), gross negligence and obstructive conduct (AC Peter and related authorities), and intentional tax evasion
- Closing guidance: placing the correct facts, evidence, remedial steps and preventive measures before SARS
Learning outcomes
The deck does not state learning outcomes. These are drawn from its content and should be confirmed before publication.
Practitioners will be able to:
- Identify the type of penalty imposed and select the correct remedy: a remittance request, an objection or an appeal
- Apply the burden-of-proof rules in section 102 to a penalty dispute and avoid shifting the onus to the taxpayer
- Prepare a remittance request that relies on all the available grounds in the Tax Administration Act and the underlying tax Act
- Determine whether SARS applied the correct understatement penalty category and percentage, and whether the bona fide inadvertent error exception or compulsory remittance applies
- Use current case law to formulate arguments in each behavioural category of the understatement penalty table
Who should attend
Tax practitioners, attorneys, advocates, accountants and in-house tax managers who handle SARS penalty assessments, remittance requests, objections and appeals.
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